AMD's Server Chip Critical to Success

Advanced Micro Devices Inc. is set to launch its highly publicized new server chip Monday, delivering the biggest jolt to its product lineup in four years.

The company's redesigned Opteron processor is the first from AMD to feature four computing engines on a single chip instead of just one or two.

AMD's belated entry into the "quad-core" market is a critical element in the financially strapped company's offensive against Intel Corp., the world's largest semiconductor company, whose market value of $148 billion makes it 21 times bigger than AMD.

Intel has outspent its smaller rival on new technologies and better absorbed the pain of a brutal price battle that has led to embarrassing market-share losses AMD hopes its new chip will reverse.

AMD has overhauled the design of the original Opteron chip, which the company says is the most important improvement in delivering higher performance, and is using a different engineering strategy than Intel.

Intel's four-core chips are actually a package of two chips with two cores each. In AMD's four-core chips, all the cores are placed on a single piece of silicon.

Industry observers have debated whether either strategy matters in terms of performance.

AMD was not a player in the lucrative server processor market until it released its first Opteron chip in 2003. Demand soared because of its energy efficiency, ease of use in servers that can handle multiple processors and other technological features, and by last year, Sunnyvale-based AMD had grown to capture about a quarter of the worldwide market, according to Mercury Research.

But Santa Clara-based Intel fought back last year with a strong new lineup of chips based on a new design, and it also beat AMD to market with its first four-core chips.

Compared with Intel's new products, AMD's product line began to look dated, and its market share plunged. AMD now controls only about 13 percent of the server market.

"What is key about this product is really getting back some of that lost share," said Dean McCarron, Mercury Research's president and principal analyst.

AMD's path toward Monday's launch has been rocky, with AMD Chief Executive Hector Ruiz saying the chips are launching about six months behind schedule. Some analysts and investors expressed disappointment that the chips available at launch are slower than expected -- operating at 1.9 gigahertz to 2.3 gigahertz, depending on the model.

AMD said it will boost their speed later this year. By comparison, Intel's fastest Xeon server processors operate at 3.0 gigahertz, which measures processing cycles per second.